Betting Markets Predicting Obama Victory

Betting markets accepting public bets on the presidential election today have coalesced around a narrative: President Obama has a good chance of retaining the Oval Office.

The Intrade market has President Obama with (as of this writing) a 72.5% chance of winning the election - and the number being that high is largely a result of predictions being made today. President Obama is up over four points in the market today alone after having hovered in the 60% range for most of the race.

Here's the intrade predictions for the electoral map. Of the swing states that are projected to go for Obama, Romney has the best chance of pulling Virginia, Colorado, and Iowa in that order. Intrade bettors are bearish on Romney's chances of taking Ohio.

With more than $13 million wagered on who will win the race for president, UK bookmaker William hill has listed odds of 1-5 for Obama and 7-2 for Romney. Ladbrokes, the other big UK bookmakers has the same line. Vegas bookmakers are prohibited by law from taking wagers on political races.

This isn't surprising. What is worthwhile is wondering if Intrade and other markets are actually valuable. Joe Weisenthal writes that Intrade is merely a clearinghouse of conventional wisdom:

And that's exactly why you should ignore InTrade this year: Because by looking at it you might think you're getting fresh insight into the data or more information somehow, but what you're really getting is a different way of seeing the same mainstream groupthink that you could get anywhere else. That's very dangerous.

Some, however, would say that while Intrade should reflect the conventional wisdom, that's not always the case. John Tierney, for example, wrote at the New York Times that "bettors beat pundits," and that Intrade beat every single pundit prediction from the Huffington Post in 2008. As Jim Pethokoukis writes for the American Enterprise Institute:

A 2004 study concluded “Prediction markets are remarkably accurate information aggregation mechanisms.” They are not perfect, of course. But I was made a believer in 2004 when the exit polls said Bush was a sure loser and Intrade gave a different story.

If you assign, say, a 70 to 80 percent chance that the national polls are correct, that still translates to about a 60 percent chance that Obama will win. That’s a lot less than most of the other oddsmakers are giving right now, but it’s about how I see things.

So, while Intrade could certainly be wrong - Intrade bet that the individual mandate would be struck down by the Supreme Court - it's important not to dismiss it out of hand.